Subletting scams and unlawful subletting is becoming an ever- increasing problem in the private rental sector, with Central London a prime target. According to the National Land Association 11% of all tenants in the UK sublet all, or part of, the property they rent from a Landlord or Letting Agency of which only 5% said they had permission from their landlord to do so. With a shortage of housing and Short Let platforms like Airbnb, that percentage is set to rise.
What is unlawful subletting? Most private landlord tenancy agreements are Assured Shorthold Tenancy agreements and these will have a standard clause which prohibits the tenant from sub-letting the property or any part of the property without the Landlord’s prior written consent. Unlawful subletting is when the landlord has not given permission for the tenant to let the rented property but the tenant does so anyway.
We are not talking about the student trying to cover their rent while they are away during the Summer months of July and August or the occasional Airbnb; subletting done temporarily and often in ignorance. We are talking about professional scammers; ‘Rogue’ lessees intentionally targeting Prime rental properties, pretending to take on leases as genuine tenants with the deliberate intention of sub-letting the accommodation for personal profit – unlawful profit made at someone else’s expense.
These people will take out a Tenancy with a Landlord or Letting Agent and move in for a short while to allay suspicion or sometimes not even move in at all. They then re-let the property to another subtenant for more money or even multiple occupants, sometimes charging up to £300/night for one room.
Now, there are some Landlords who may turn a blind eye to subletting, after all, if the rent is being paid on time why worry? But unauthorised subletting poses huge risks to landlords, as they lose control over who is living in their property, rendering any previous background checks pretty much pointless. The subtenants may not meet the landlord’s criteria for selecting tenants in terms of credit history, references, right to rent checks and the like. The Landlord has no legal relationship with the subtenant which is crucial when it comes to collecting rent or ending a tenancy. Different subtenants moving in and out of the property means accelerated wear and tear and a greater risk of damage to the property as well as noise and nuisance for neighbours. Furthermore, if the Tenant is subletting to numerous individuals this could result in it becoming a House of Multiple Occupancy for which you need a licence from the Council. Landlords who do not have a licence for an H.M.O. can be fined. If the subletting amounts to a change of use of the property, planning permission from the Council may be required. More importantly, subletting can place a landlord in breach of the terms of their mortgage and/or insurance policy, rendering their insurance policy invalid, and even bring them into conflict with their freeholder as they could be in breach of their lease covenant. The Tenant could also stop paying rent and you could end up with a property full of strangers that you do not have an AST with.
How do you prevent or spot someone trying to sublet without permission? It is important to be a hands- on Landlord or use professional Letting Agents. Make sure there is no sub-letting clause in your tenancy agreement. Ensure due diligence in referencing, carrying out thorough pre-letting checks. Check the person is who they say they are, that they can pay the rent (3 months of bank statements is advisable) and have honoured past commitments. Relying on computerised reference checks alone is not enough to ensure the quality and reliability of a tenant. It is important to meet the tenant in person and gather in depth background information in order to get a proper feel for the person, question them about what they are doing in London and ask them about their future plans. One of the tell-tale signs of a potential unlawful subletter is a single tenant or childless couple renting a 3 to 4 bedroom property. But others include being in a hurry to close a deal and offering to pay the rent a year upfront. It is worth you or your Agents regularly checking the various short let websites to check your property is not being marketed for the short term.
But even all this due diligence may not flag up someone with the intention of unlawful subletting, someone who is intentionally setting out to deceive and they may slip through the net. Once a tenant has been taken on the only way you would find out they are subletting would be with routine property inspections carried out by you or your Letting agents. Professional letting agents carry out regular inspections as part of their service something online agents cannot provide. Routine inspections allow you to check the person that signed the Tenancy Agreement is the person living at the property. It would also enable you to spot if there are signs of additional people living there, number of toothbrushes, clothes in cupboards etc. and to check they have not changed the locks. Further signs would be complaints from neighbours re. noise and number of people coming in and out and rubbish being put out on the wrong days. It is important to log all these details and get statements from neighbours all of which can be used should you have to go to court.
If the Tenant is found to be unlawfully sub-letting then they are in breach of their contract you can take legal action. Even if there is specific term in the lease preventing sub-letting there is usually a Clause not to use the property for trade or business purposes or any purpose other than as a private residence. By letting out the property on a short term basis for a couple of days or even a couple of weeks the Tenant is in breach. Under an Assured Shorthold Tenancy the Tenant has to live in the Property as their only principal home – if they are moving elsewhere in order to sub-let then this is no longer their principal home and they lose their Tenancy status you can start the process to evict them by serving them Notice to Quit.
This is usually a written Section 8 notice which is used when a tenant has breached their Tenancy Agreement. The Landlord must have legitimate grounds for seeking possession and must state them and the notice period; It is always best to seek legal advice on correct procedure and time-frames for issuing legal notices. When this notice expires the landlord has to apply to the county court for a possession order which gives them the right to evict them and take possession. The Landlord or Letting Agents must supply evidence of the sub-letting and any grounds given can be contested by the tenant in court. Serving a Section 8 notice can end up being both costly and time-consuming.
For this reason, some Landlords would rather serve a written Section 21 notice for, unlike with a Section 8 notice, a Section 21 notice does not require the Landlord to provide legal grounds to evict the tenant or prove to the court that it is reasonable to evict them – when the notice expires you just have to apply to the County Court for a possession order to evict anyone in the property. However, a Section 21 notice cannot end before the fixed term unless there is a Break Clause and even then it cannot be served in the first four months of a Tenancy. So this too is a lengthy and frustrating process. In the mean time, the tenant, who cannot be evicted without a court order, can simply continue to take money from the sub-letting tenants and not pass it onto the landlord.
It is both the landlord and the sub-tenant who are the victims in these scams. The subletting scammers know how to work the system. With the shortage of housing available in London these short-term sublets (usually to tourists) are draining units off the long-term rental market and undermining the sense of community and quality of life with late night noise and anti-social behaviour. They are putting a burden on an already stretched rental market.
In 2013 the government passed the Prevention of Social Housing Fraud Act making it a criminal offence to unlawfully sublet social housing properties. Those found guilty face up to two years in jail and huge fines. With unlawful subletting becoming an ever- increasing problem in the private sector and undeserving tenants holding tenancies that could be used for those that are deserving should there now be a call for legislation in the Private Rental Sector?
Please call us for an informal chat and we can help point you in the right directions +44(0)207 581 1631
Palace Gate manages all aspects of property ownership and complex lifestyles.